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October 29, 2012

Five Good Questions for 'Behavior Gap' Author Carl Richards

The CFP shares his thoughts on the difference between what we should do and what we actually do

Carl Richards is a certified financial planner (or CFP) and the founder of Prasada Capital Management, a fee-only firm he created to help clients with two objectives: to avoid losing money and to enjoy their lives. He also explores how our relationships with money impact the quality of our lives at BehaviorGap.com.

He is also the author of a best-selling book, entitled The Behavior Gap. Carl earned a bachelor of science degree in finance from the University of Utah. What follow are what I hope are Five Good Questions for Carl Richards.

1. Your drawings help people understand what may be difficult concepts. What do you think are the keys to an effective drawing?

Being an amateur! As is very apparent, I have no art background, but for some reason I found I learned things I didn’t know when I went through the process of trying to explain things using a Sharpie and a piece of paper. Limiting yourself to simple tools, like a whiteboard, pen and paper, or the back of a napkin forces you to get to the stuff that really matters.

Having no artistic talent helps as well. Because I can’t draw a horse or a bird, I have to use simple lines, a box or a circle.

2. What have you found to be the most effective tool(s) for dealing with the “behavior gap” (the difference between what we should do and what we actually do)?

Asking questions. In our industry we have an obsession with having all the answers, but we spend very little time making sure we are asking the right questions to start with. If we can help people get clear about why they are doing the things they are doing, then, maybe we can help them make change.

3. You’re a powerful advocate for meaningful conversations about money. How do you suggest people get started and go about having those conversations?

First recognize that is it okay to talk about money. Most of us were taught that money, sex, politics and religion were things you didn’t talk about in polite company. Of course we have gone way too far when it comes to sex, but we still have not learned to talk about money.

Another key is to do what Stephen Covey suggested and learn to listen to understand and not judge. People want to know that we understand them before we give them advice. How can we prescribe before we take the time to diagnose?

4. You are careful to advocate life planning rather than just financial planning. What does that mean?

I am not sure that life planning is the right term, but the reality is that the process of planning for our financial futures is about life. Almost every goal we have is funded by dollars. Security, health, safety, education, retirement are all make possible to some extent using money.

So if we think that financial planning is a process of spreadsheets and calculators we are kidding ourselves. These things are about life. We are talking about people most important goals and dream and the things that keep them up at night.

5. As you emphasize, we need and may even want simplicity but we are attracted to complexity. How do you suggest that people go about simplifying their financial lives?

Start by getting clear about where you are today and where you want to go, then give yourself permission to peruse the simplest path to make it happen. So often we think that because the problem feels complex to us, the solution must be complex, when more often it is the simplest solution that has the staying power to get us moving forward.